Keywords: Brazil, Power Investment Program, PIEE,

On August 11th, 2015, the Brazilian Government announced the Power Investment Program ("Programa de Investimento em Energia Elétrica", or "PIEE"), which foresees investments in the amount of BRL 186 billion in new power generation and transmission projects through public auctions to be held between August 2015 and December 2018.

In relation to the generation segment, the Brazilian Government estimates that BRL 116 billion will be destined to the construction of hydroelectric power plants, small hydroelectric power plants ("PCHs"), wind farms, solar photovoltaic power plants, fossil and biomass (sugarcane bagasse, wood chips and others) and thermoelectric plants, which will result in a supply increase of up to 31,500 MW, of which 26,500 MW will be generated from renewable sources, as detailed in the chart below:

Projects Capacity (MW)
Hydro 11,000
PCH (Small Hydro) 1,000 to 1,500
Wind 4,000 to 6,000
Solar Photovoltaic 2,000 to 3,000
Biomass Thermo 4,000 to 5,000
Fossil Thermo 3,000 to 5,000
Total 25,000 to 31,500

To achieve the goals, the Brazilian Government will carry out at least three energy auctions per year in the modalities A-3, A-5, Alternative Sources and Reserve Energy.

In relation to the financing conditions for power generation projects, the PIEE confirms that the Brazilian Bank for Economic and Social Development ("BNDES") will finance projects with at least 1.2 of Debt Service Coverage Ratio at the Brazilian Long Term Interest Rate ("Taxa de Juros de Longo Prazo", or "TJLP"), currently at 6.5%, plus 1.2% and risk spread, subject to the applicable requirements of local content, as well as the following conditions according to the power source:

Projects BNDES's Maximum Participation Maximum Amortization Period
Hydro 50% 25 years
PCH (Small Hydro) 70% 19 years
Wind 70% 19 years
Solar Photovoltaic 70% 23 years
Biomass Thermo 70% 19 years
Fossil Thermo 50% 20 years

Regarding the power transmission segment, the Brazilian Government announced that there will be bids for the grant of new concessions that will demand investments in the amount of BRL 70 billion with an expansion of 37,600 km in transmission lines in all regions of the country.

In addition to the three transmission bids scheduled for August, October and December 2015, the Brazilian Government affirmed that there are projects under analysis aiming the: (i) supply to the State of Amazonas and increase of the reliability in Manaus in the Northern region; (ii) outflow of the power generated by São Luiz do Tapajós and Jatobá Hydroelectric Plants in the Middle-West region; (iii) receipt of the power generated by the São Luiz do Tapajós and Jatobá Hydroelectric Plants in the Southern and Southeastern regions; (iv) expansion of the South-Southeast interconnection; and (v) outflow of the power generated by wind and solar plants in the Northeastern and Southeastern regions.

Despite the market criticism regarding the lack of great innovations of the PIEE, considering that the mentioned projects had already been presented by the Energy Research Company ("Empresa de Pesquisa Energética", or "EPE"), the PIEE is an important indicator of the Brazilian Government's intention to prioritize the expansion of the power generation capacity and the power transmission system with the support of domestic and international private capital.

To access the presentation on the PIEE published by the Brazilian Ministry of Mines and Energy ("Ministério de Minas e Energia", or "MME"), click here.

Originally published August 28, 2015

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